1

A STUDY ON WORKING CAPITAL MANAGEMENT OF ASHOK LEYLAND - WIND ENERGY LIMITED CHENNAI.
A PROJECT REPORT

Submitted By

A.N.PRADEEP KUMAR
(Register Number: 105904501033)

IN MASTER OF BUSINESS ADMINISTRATION

K. L. N COLLEGE OF ENGINEERING POTTAPALAYAM 630 611 SIVAGANGAI DISTRICT Submitted to

ANNA UNIVERSITY, CHENNAI January April 2012

CERTIFICATE OF VIVA-VOCE-EXAMINATION
This is to certify that Mr. A.N.PRADEEP KUMAR (Reg. No.105904501033) has been subjected to Viva-Voice-Examination on ________at ______ at K.L.N.COLLEGE OF ENGINEERING, POTTAPALAYAM, SIVAGANGAI DISTRICT 630611 for the project titled A STUDY ON WORKING CAPITAL MANAGEMENT OF ASHOK LEYLAND - WIND ENERGY LIMITED CHENNAI. submitted for the award of degree of Master of Business Administration of Anna University, Chennai.

Internal Examiner Name Designation Address : : :

External Examiner Name :

Designation : Address :

Department of Management Studies K.L.N. College of Engineering, Pottapalayam, Sivagangai District-630611 Dr.T.Jothimurugan Director MBA K.L.N. College of Engineering, Pottapalayam, Sivagangai District.

ANNA UNIVERSITY, CHENNAI

BONAFIDE CERTIFICATE

Certified that this project report titled A STUDY ON WORKING CAPITAL MANAGEMENT OF ASHOK LEYLAND - WIND ENERGY LIMITED CHENNAI is the bonafide work of

A.N.PRADEEP KUMAR who carried out the project work under my supervision during January 2012 to April 2012.

SIGNATURE Dr.T.JOTHIMURUGAN DIRECTOR- MBA

DEPARTMENT OF MANAGEMENT STUDIES

SIGNATURE Dr. A.C.KANNAN PROFESSOR

SUPERVISOR
DEPARTMENT OF MANAGEMENT STUDIES

K.L.N. COLLEGE OF ENGINEERING, POTTAPALAYAM, SIVAGANGAI DISTRICT.

K.L.N. COLLEGE OF ENGINEERING, POTTAPALAYAM, SIVAGANGAI DISTRICT.

A.N.PRADEEP KUMAR Register No: 10510419033 II Year MBA, Department of Management Studies,

K. L. N COLLEGE OF ENGINEERING

DECLARATION

This is to declare that the project report entitled, A STUDY ON WORKING CAPITAL MANAGEMENT OF ASHOK LEYLAND - WIND ENERGY LIMITED CHENNAI a bonafide record of the original work undertaken by me, under the guidance of Dr.A.C.KANNAN , Department of Management Studies, K. L. N COLLEGE OF ENGINEERING, Madurai and this has not been submitted earlier to any other university for the award of any degree, diploma, or similar title of recognition.

A.N.PRADEEP KUMAR Register No: 10510419033

ACKNOWLEDGEMENT
The satisfaction that accompanies the successful completion of any task would be incomplete without mentioning about the people who made it possible, whose constant guidance and encouragement has crowned the efforts with success. I take up this opportunity to thank our Principal Dr.A.V.RAMPRASAD and our MBA Director Dr.T.Jothimurugan, K.L.N.College of Engineering for giving me this wonderful opportunity for doing this project. I express my deep gratitude to my Project Guide Dr.A.C.KANNAN, Faculty, K.L.N. College of Engineering, who greatly supported me, encouraged me and helped me to complete this project successfully. I express my sincere thanks to CHIEF EXECUTIVE OFFICER Mr.C.M.SAMBASIVAM and G.PRASATH DIVISIONAL MANAGER my organization Guide Mr. R.SURESH KUMAR EXECUTIVE ACCOUNTS & ADMINISTRATION of ASHOK LEYLAND WIND ENERGY LIMITED, for her permission and motivation to complete this project successfully.

A.N.PRADEEPKUMAR

TABLE OF CONTENTS CHAPTER NO. TITLE

ABSTRACT LIST OF TABLES LIST OF FIGURES

PAGE NO.

1.1 1.2 2.1 2.2 2.3 2.4

Introduction Company Profile Objectives scope of the study Literature Review Research Methodology

1 7 11 12 13-14 15

Analysis and Interpretation

16-45

4.1 4.2 4.3

Findings Suggestions Conclusion

46-48 49 50

Bibliography

51

Appendices

52-56

ABSTRACT

This project is based on the study of working capital management in ASHOK LEYLAND WIND ENERGY LIMITED. An insight view of the project will encompass what it is all about, what it aims to achieve, what is its purpose and scope, the various methods used for collecting data and their sources, including literature survey done, further specifying the limitations of our study and in the last, drawing inferences from the learning so far. ASHOK LEYLAND WIND ENERGY LIMITED is a leading domestic Wind Energy services company. The working capital management refers to the management of working capital, or precisely to the management of current assets. A firms working capital consists of its investments in current assets, which includes short-term assetscash and bank balance, inventories, receivable. This project tries to evaluate how the management of working capital is done in ASHOK LEYLAND WIND ENERGY LIMITED through inventory ratios, working capital ratios, computation of cash, Statement of changes in working capital.

LIST OF TABLES
S.NO: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 TITLE SCHEDULE OF CHANGES IN WC FOR 2006-07 SCHEDULE OF CHANGES IN WC FOR 2007-08 SCHEDULE OF CHANGES IN WC FOR 2008-09 SCHEDULE OF CHANGES IN WC FOR 2009-10 SCHEDULE OF CHANGES IN WC FOR 2010-11 NET WORKING CAPITAL RATIO WORKING CAPITAL TURNOVER RATIO CURRENT ASSETS TO TOTAL ASSETS RATIO CURRENT LIABILITIES TO TOTAL LIABILITIES RATIO CURRENT RATIO LIQUID RATIO GROSS PROFIT RATIO NET PROFIT RATIO INVENTORY TURNOVER RATIO INVENTORY HOLDING PERIOD RECEIVABLES TURNOVER RATIO DEBTORS COLLECTION PERIOD CREDITORS TURNOVER RATIO CREDIT COLLECTION PERIOD RECEIVABLES TO CURRENT ASSETS RATIO CASH TURNOVER RATIO CASH RATIO CASH TO CURRENT ASSETS RATIO TABLE NO: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 PAGE NO: 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46

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CHAPTER 1
INTRODUCTION&COMPANYPROFIE

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1.1 INTRODUCTION WORKING CAPITAL MANAGEMENT

Working capital management is concerned with the problems arise in attempting to manage the current assets, the current liabilities and the inter Relationship that exist between them. The term current assets refers to those Assets which in ordinary course of business or turned in to cash within one year without undergoing a diminution in value and without disrupting the operation of the firm. The major current assets are cash, marketable securities, account receivable and inventory. Current liabilities ware those liabilities which intended at their inception to be paid in ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are account payable, bill payable, bank over-draft, and outstanding expenses. The goal of working capital management is to manage the firm s current assets and current liabilities in such way that the satisfactory level of working capital is mentioned. The current should be large enough to cover its current liabilities in order to ensure a reasonable margin of the safety.

Definition:According to Park & Gladson- The excess of current assets of a business (i.e. cash, accounts receivables, inventories) over current items owned to employees and others (such as salaries & wages payable, accounts payable, taxes owned to Government).

Working Capital = Current Assets Current Liabilities

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1.1.1 NEED OF WORKING CAPITAL MANAGEMENT

To achieve the objective of financial decision making Maximize the shareholders wealth. To deal in the form of current assets to deal with the problem arising out of lack of immediate realization of cash against goods sold. Therefore sufficient working capital is necessary to sustain sales activity. The amount required to be invested in this current assets is always higher than the funds available from current liabilities. This is the precise reason why the needs for working capital arise.

1.1.2 GROSS WORKING CAPITAL AND NET WORKING CAPITAL There are two concepts of working capital management

1) Gross Working Capital:

Gross working capital refers to the firms investment I current assets. Current Assets are the assets which can be convert in to cash within year includes cash, Short term securities, debtors, bills receivable and inventory.

2) Net Working Capital:

Net working capital refers to the difference between current assets and current Liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors, bills payable and outstanding expenses. Net working capital can be positive or negative.

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1.1.3 TYPES OF WORKING CAPITAL: i. Permanent Working Capital: ii. Temporary Working Capital: Permanent Working Capital:
The need for current assets arises, as already observed, because of the cash cycle. To carry on business certain minimum level of working capital is necessary on continues and uninterrupted basis. For all practical purpose, this requirement will have to be met permanent as with other fixed assets. This requirement refers to as permanent or fixed working capital.

Temporary Working Capital:

Any amount over and above the permanent level of working capital is temporary, fluctuating or variable, working capital. This portion of the required working capital is needed to meet fluctuation in demand consequent upon changes in production and sales as result of seasonal changes.

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Graph shows that the permanent level is fairly castanet; while temporary working capital is fluctuating in the case of an expanding firm the permanent working capital line may not be horizontal. This may be because of changes in demand for permanent current assets might be increasing to support a rising level of activity.

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1.1.4 DETERMINANTS OF WORKING CAPITAL:

1) Nature of Business: Some businesses are such, due to their very nature, that
their requirement of fixed capital is more rather than working capital. These businesses sell services and not the commodities and that too on cash basis. E.g. public utility services like railways, infrastructure oriented project etc. There requirement of working capital is less.

2) Length of Production Cycle:

In some business like machine tools industry, the time gap between the acquisition of raw material till the end of final production of finished products itself is quite high. As such amount may be blocked either in raw material or work in progress or finished goods or even in debtors. Naturally there need of working capital is high.

3) Size and Growth of Business:

In very small company the working capital requirement is quit high due to high overhead, higher buying and selling cost etc. As such medium size business positively has edge over the small companies. But if the business start growing after certain limit, the working capital requirements may adversely affect by the increasing size.

4) Business/ Trade Cycle:

If the company is the operating in the time of boom, the working capital requirement may be more as the company may like to buy more raw material, may increase the production and sales to take the benefit of favorable market, due to increase in the sales, there may more and more amount of funds blocked in stock and debtors etc.

5) Terms of Purchase and Sales:

Some time due to competition or custom, it may be necessary for the company to extend more and more credit to customers, which increase the working capital requirement. On the other hand, in the case of purchase, if the credit is offered by suppliers of goods and services, but it is necessary to purchase on cash basis, the working capital requirement will be higher 6) Profitability: The profitability of the business may be vary in each and every individual case, which is in turn its depend on numerous factors, but high profitability will positively reduce the strain on working capital requirement of the company

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7) Operating Efficiency: If the business is carried on more efficiently, it can operate in profits which may reduce the strain on working capital; it may ensure proper utilization of existing resources by eliminating the waste and improved coordination etc.

8) Seasonal Variations:
Generally, during the busy season, a firm requires larger working capital than in slack season.

9) Working Capital Cycle:

The speed with which the working cycle completes one cycle determines the requirements of working capital. Longer the cycle larger is the requirement of working capital.

10) Rate of stock turnover:

There is an inverse co-relationship between the question of working capital and the velocity or speed with which the sales are affected. A firm having a high rate of stock turnover will needs lower amt. of working capital as compared to a firm having a low rate of turnover.

11) Credit Policy:

A concern that purchases its requirements on credit and sales its product / services on cash requires lesser amt. of working capital and vice-versa.

12) Earning Capacity and Dividend Policy:

A firm maintaining a steady high rate of cash dividend irrespective of its profits needs working capital than the firm that retains larger part of its profits and does not pay so high rate of cash dividend.

13) Price Level Changes:

Changes in the price level also affect the working capital requirements. Generally rise in prices leads to increase in working capital.

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1.2 COMPANY HISTORY

ASHOK LEYLAND WIND ENERGY LTD Ashok Leyland Finance Company (IndusInd Bank) has promoted wind energy division in 1998. The company installed 17.875 MW project with 66 WTGs (Wind Turbine Generators) in Tirunelveli and Coimbatore district (37+29 WTGs). The company has planned to develop further projects. At that time Ashok Leyland Ltd has required more power for their production sectors in lowest rate. So that Ashok Leyland Ltd has planned to invest for 50 WTGs project i.e., 11.250 MW. Ashok Leyland Ltd has requested to purchase the wind Energy Division for further project development. IndusInd bank agreed and merged the company to Ashok Leyland Project Services Ltd in 2004. Ashok Leyland Ltd has invested for 86 WTGs Project (25.50 MW) in Tirunelveli and Coimbatore. IndusInd Bank also invested for 88 (WTGs) Project i.e., 19.800 MW in Tirunelveli District. Overall the company had

240 WTGs in Coimbatore belt 99 WTGs and Tirunelveli 141 WTGs. IndusInd Bank owned 154 WTGs and 86 WTGs owned by Ashok Leyland Ltd. Total capacity of 63.175 MW project. AL-Wind Energy (A Division of Ashok Leyland Project Services Ltd) has registered in UNFCCC (United Nations Framework Convention on Climate Change) for CDM Project i.e., Clean Development Mechanism. UNFCCC has accepted the registration and advice us for further development activates with support of Consultant. Appointed consultants for validate and verify the Documents and submitted to UNFCCC for sale of CERs Carbon Emission Reduction units. Yearly 52000 CERs to 56000 CERs sold as of 2010.Carbon Credit Income has received yearly 4.3 Crores to 6.10 Crores depends upon the Carbon Credit Rate in the World market. Ashok Leyland Ltd has sale of Power for third party for 50 WTGs Project for Lottee India Corporation, India Pistons Ltd and Saint Gobain India Ltd. As per the TNEB norms Ashok Leyland Ltd stop the sale of power for third party in 2009. Wind powers consumed by Ashok Leyland Ltd and Hinduja Foundries Ltd.

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1.2.1 COMPANY PROFILE

ASHOK LEYLAND WIND ENERGY LIMITED 1. AL Wind Energy - ALWE (a Division of Ashok Leyland Project Services Limited) is hived off and a new company has been formed in the name of Ashok Leyland Wind Energy Limited (ALWEL) with effect from 1st January, 2011, with the purchase of Wind mill division from ALPS for a consideration of Rs.705 Lakhs. 154 windmills from IndusInd Bank Limited (IBL) for a consideration of Rs.6816 Lakhs. Taking over the O&M activities from ALPS in respect of 66 windmills owned by AL. Earlier, ALWE was operating and maintaining: (154 wind mills of IBL and 86 wind mills of AL.) 2. ALWEL now owns 154 wind mills and also operating 86 wind mills of AL.

3. Details of wind mills:

Details of present ownership of wind mills: S. No Name of the Company No of wind mills MW

1 2

ALWEL Ashok Leyland Limited Total

154 86 240

37.68 25.50 63.175

4. Shareholding Pattern:
S. No 1 2 Share Holders Hinduja Foundries Ltd Ashok Leyland Project Services Ltd Total Amount (Rs) 120,187,500.00 180,312,500.00 300,500,000.00 % 40 60 100

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5. Directors
Present board comprises of KS, ARC, MAHADEVAN (EX HFL) 6. Performance Review: FIRST FULL YEAR OF OPERATION Amount in Lacs Particulars Generation Income O&M Income Carbon Credit Income Other Income Total Income Expenditure EBITDA Depreciation Interest PBT PAT 5.93 901.84 209.37 692.47 282.84 147.42 262.21 262.21 1.33 1,006.42 242.75 763.67 283.99 154.05 325.63 325.63 350.00 4.00 2,350.25 837.84 1,512.41 851.98 456.52 203.91 162.91 Actual YTD July'11 857.24 38.67 MPB YTD July'11 966.42 38.67 MPB YTD March '12 1,880.25 116.00

Loans availed & Other Liabilities: ALWEL has so far availed loan of Rs.4211 lacs (Sanction: Rs.4800 lacs) from Indian Bank. The repayment commitment for the year 2011-12, against this loan aggregates to Rs.750 lacs. Out of this Rs.300 lacs has since been paid out of the fund drawn against loan / share capital. Next two installments of Rs.225 lacs each (falling due in Oct11 & Jan12) need to be paid by the Company. This is proposed to be met through internal generation.

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1.2.2 WINDMILLs

AL GROUP- WINDMILL OPERATIONS

240 WIND MILS

240 Wind Mills
CAPACITY - 63.175 MW

ALWEL

AL

154 Windmills

86 Windmills
CAPACITY - 25.50 MW

CAPACITY - 19.80 MW 88 Windmills

CAPACITY - 17.875 MW 66 Windmills

Thandayarkulam - 36* Karnakulam - 22* Keelkulam -16* Kothankulam - 14*

T T T T

Pazhavoor - 31* Chandrapuram - 17 Gudimangalam - 12 Perungudi - 6

T C C T

Panangudi - 10** Melapuram - 5** Melapuram - 1** Udumalapet - 70*

T C C C

----Suzlon

HFL -72 AL Ennore- 10 AL Hosur -6

HFL AL Ennore AL Hosur

-37 - 24 -5

AL Ennore AL Hosur AL Guindy AL VVC

45 24 1 8

3 1 4

* 56.25 MW Project ** 9.75 MW T- Thirunelveli C- Coimbatore

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CHAPTER - 2 OBJECTIVES &SCOPES

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2.1 OBJECTIVE OF THE STUDY:

To study the working capital management of Ashok Leyland wind energy Ltd.

To study the optimum level of current assets and current liabilities of the Company.

To study the liquidity position through various working capital related Ratios.

To study the working capital components such as receivables accounts, Cash management, Inventory position.

To study through the net profit ratio & other profitability ratio, understand the profitability of the company.

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2.2 SCOPE OF THE STUDY:

The scope of the study is identified after and during the study is conducted. The Study of working capital is based on tools like trend Analysis, Ratio Analysis, Working capital leverage, operating cycle etc.

The management of working capital helps us to maintain the working capital at a satisfactory level by managing the current assets and current liabilities. It also helps to maintain proper balance between profitability, risk and liquidity of the business significantly.

By managing the working capital, current liabilities are paid in time. If the firm makes payment to it creditors for raw material in time, it can have the availability of raw material regularly, which does not causes any obstacles in production process. Adequate working capital increases paying capacity of the business but the excess working capital causes more inventories, increases the possibility of delay in realization of debts.

On the other hand, absence of adequate working capital leads to decrease in return on investment. The goodwill of the firm is also adversely affected due to the inability to pay current liabilities in time.

Hence, the management of working capital helps to manage all the factors affecting the working capital in the most profitable manner

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2.3 Literature Review:

Islam and Rahman (1994) had article on Working capital Trends of the Selected Enterprises in Bangladesh". Optimum working capital enables a business to have its credit standing and permits the debts payments on the date of its maturity and helps to keep itself fairly in liquid position which enables the business to attract borrowing from the banks. It also helps to maintain all-round efficiency in operations

Shin and Soenen (1998) used a sample of 58,985 firms years covering the period 1975-1994 in order to investigate the relation between net-trade cycle that was used to measure the efficiency of working capital management and corporate profitability. In all cases, they found a strong negative relation between the length of the firms nettrade cycle and its profitability.

Ghosh and Maji (2003) attempted to examine the efficiency of working capital management of Indian cement companies during 1993 to 2002. By using regression analysis and industry norms as a target efficiency level of individual firms, they tested the speed of achieving target level of efficiency by individual firms during the period of study and found that some of the sample firms successfully improved efficiency during these years.

Lazaridis and Tryfonidis (2006) conducted a cross sectional study by using a sample of 131firms listed on the Athens Stock Exchange for the period of 2001-2004 and found statistically significant relationship between profitability, measured through gross operating profit and cash conversion cycle and its components. Based on the results analysis of annual data by using correlation and regression tests, they suggest that managers can create profits for their companies by correctly handling the cash conversion cycle and by keeping each component of the conversion cycle at an optimum level.

Garcia-Terual et all (2007) collected a panel of 8872 small to medium-sized enterprises from Spain covering the period 1996-2002. They tested the effects of working capital management on SME profitability using the panel data methodology.

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The results, which are robust to the presence of endogeneity, demonstrated that managers could create value by reducing their inventories and the number of days for which their accounts are outstanding. Moreover, shortening the cash conversion cycle also improves the firms profitability

Singh and Pandey (2008) had an attempt to study the working capital components and the impact of working capital management on profitability of Hindalco Industries Limited for period from 1990 to 2007. Results of the study showed that current ratio, liquid ratio, receivables turnover ratio and working capital to total assets ratio had statistically significant impact on the profitability of Hindalco Industries Limited.

Mathuva (2009) examined the influence of working capital management components on corporate profitability by using a sample of 30 firms listed on Nairobi Stock Exchange for the periods 1993-2008. He used Pearson and Spearmans correlations, the pooled ordinary least squares and the fixed effects regression models to conduct data analysis.

The Amarjit Gill, Nahum Biger, Neil Mathur (2010) paper seeks to extend Lazaridis and Tryfonidiss findings regarding the relation between working capital management and profitability. A sample of 88 American firms listed on New York Stock Exchange for a period of 3 years from 2005 to 2007 was selected. They found statistically significant relation between the cash conversion cycle and profitability, measured through gross operating profit. It follows that managers can create profits for their companies by handling correctly the cash conversion cycle and by keeping accounts receivables at an optimal level.

The key findings of his study were that there exists a highly significant negative relationship between the time it takes for firms to collect cash from their customers and profitability, there exists a highly significant positive relationship between the period taken to convert inventories to sales and profitability and there exists a highly significant positive relationship between the time it takes for firms to pay its creditors and profitability.

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2.4 RESEARCH METHODOLOGY

Research Design:
Analytical Research technique was adopted in the project. Generally, analytical techniques are designed to analyze something and it collects data for a definite & certain purpose.

Data collection:

Secondary data:

The secondary data are collected from annual reports, institute magazines, brochures, and prospectus Policy documents of the department etc.

Tools used for the study:

Statement of changes in working capital.

Ratio analysis

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CHAPTER - 3
ANALYSIS AND INTERPRETATION

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3.1 RATIO ANALYSIS 3.2 WORKING CAPITAL RATIOS:

3.2.1 Turnover ratios 3.2.2 Liquidity ratios 3.2.3 Profitability ratios

3.3. INVENTORY MANAGEMENT RATIOS:

3.3.1 Inventory turnover ratio 3.3.2 Inventory holding period

3.4. RECEIVABLES MANAGEMENT RATIOS:

3.4.1 Debtors turnover ratio 3.4.2 Debtors collection period 3.4.3 Creditors turnover ratio creditors 3.4.4 Creditors holding period

3.5. CASH MANAGEMENT RATIOS:

3.5.1Cash ratio 3.5.2 Cash turnover ratio

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RATIO ANALYSIS Ratio Analysis is one of the most powerful tools of financial analysis. Its the process of establishing and interpreting various ratios. It is a process of comparison of one figures against another, which make a ratio, and the appraisal of the ratios to make proper analysis about the strengths and weakness of the company operations. Ratio analysis is extremely helpful in providing valuable insight into a companys financial picture.

3.1 WORKING CAPITAL:

Working capital is the life blood and centre of business. Adequate amount of working capital is very much essential for the smooth running of the business. And the most important part is the efficient management of working capital in right time. The liquidity position of the firm is totally effected by the management of working capital. So, a study of changes in the uses and sources of working capital is necessary to evaluate the efficiency with which the working capital is employed in a business. This involves the need for working capital analysis.

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3.2 WORKING CAPITAL RATIOS 3.2.1 TURNOVER RATIOS: WORKING CAPITAL TURNOVER RATIO:
A measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales.

A company uses working capital (current assets - current liabilities) to fund operations and purchase inventory. These operations and inventory are then converted into sales revenue for the company.

3.2.2 LIQUIDITY RATIOS: 3.2.2.1 CURRENT RATIO:

A liquidity ratio that measures a company's ability to pay short-term obligations. The Current Ratio formula is:

Also known as "liquidity ratio", "cash asset ratio" and "cash ratio" As a conventional rule, current ratio of 2:1 or more is considered satisfactory. It is based on the logic that the higher the current ratio the more the firms ability to meet its current obligations.

3.2.2.2 QUICKRATIO:
An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The quick ratio is calculated as:

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Also known as the "acid-test ratio" or the "quick assets ratio".

Generally quick ratio of 1:1 is considered to represent a satisfactory current financial condition. The quick ratio remains as an important index of the firms liquidity and is a more absolute test than the current ratio.

3.2.3 Profitability ratios 3.2.3.1 GROSS PROFIT RATIO

Is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales.
Gross Profit Ratio = (Gross profit / Net sales) 100

Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products.

3.2.3.2 NET PROFIT RATIO:

The Net Profit Ratio establishes the ratio between net profit (after tax) and sales, and indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. It gives the measure of net income generated by each rupee of sales.
Net Profit Ratio = (Net profit / Net sales) 100

NP ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment.

3.3. INVENTORY MANAGEMENT RATIOS 3.3.1 INVENTORY TURNOVER RATIO:A ratio showing how many
times a company's inventory is sold and replaced over a period.

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The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days".

3.3.2 INVENTORY HOLDING PERIOD:

In a long position, holding period refers to the time between an asset's purchase and its sale. In a short sale, the holding period is the time between when a short seller initially borrows an asset from a brokerage, and when he or she sells it back - in other words, the length of time for which the short position is held. Inventory Holding Period = 365 .

INVENTORY TURNOVER RATIO

3.4. RECEIVABLES MANAGEMENT RATIOS 3.4.1 DEBTORS TURNOVER RATIO:

An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. . Formula:

Some companies' reports will only show sales - this can affect the ratio depending on the size of cash sales.

3.4.2 DEBTORS COLLECTION PERIOD:

The average collection period ratio represents the average number of days for which a firm has to wait before its debtors are converted into cash. Formula: Debtors/Receivable Turnover ratio:

(Trade Debtors No. of Working Days) / Net Credit Sales

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3.4.3CREDITORS TURNOVER RATIO:

It indicates the number of times sundry creditors have been paid during a year. It is calculated to judge the requirements of cash for paying sundry creditors.

Creditor Turnover Ratio = Net Credit Purchases*365 days Average Trade Creditor
Net credit purchases consist of gross credit purchases minus purchase return.

3.4.4 CREDITORS HOLDING PERIOD:

Formula

Creditors holding period

360

Creditor Turnover Ratio 3.5. CASH MANAGEMENT RATIOS 3.5.1 CASH RATIO:
The ratio of a company's total cash and cash equivalents to its current liabilities. The cash ratio is most commonly used as a measure of company liquidity. Cash + Marketable securities Cash Ratio = -------------------------------------Current Liabilities Since cash is a most liquid asset, the financial analyst may examine this ratio for his purpose of study. Trade investment or marketable securities are equivalent of cash and therefore they may be included in the computation in the computation of cash ratio.

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3.5.2 CASH TURNOVER RATIO:

Cash Turnover Ratio shows the number of times that cash turnover in a year. A lower ratio may indicate the inefficient use of working capital.
Formula:

Cash Turnover = Cost of sales / Cash Or, Cash Turnover Ratio = 365 days / Cash balance ratio

3.5.3 CASH TO CURRENT ASSET RATIO

Cash to current asset ratio is calculated by dividing cash by current assets and expressed in percentages. Cash is compared with current assets first to know the proportion of cash in current assets. A high proportion of cash to total assets directly affects the profitability of the firm because large amount of cash is kept as unproductive assets. Cash Cash to current asset ratio = ----------------------Current Assets

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STATEMENT SHOWING THE SCHEDULE OF CHANGES IN WORKING CAPITAL:

FOR THE YEAR 2006-2007 PARTICULARS CURRENT ASSESTS inventories sundry debtors cash and bank balances loan & advances (A) CURRENT LIABILITIES liabilities provisions (B) (A-B) WORKING CAPITAL increasing in WC TOTAL (14,590,300) 82,203,081 67,612,781 67,612,781 89,284,687 67,612,781 82,203,081 89,286,227 69,729,576 12,501,209 82,230,785 27,612,630 13,138,409 40,751,039 42,116,946 637,200 3,171,710 23,796,333 16,549,532 24,124,450 67,640,485 3,737,406 47,984,094 10,103,586 46,538,734 108,363,820 22,414,284 565,696 24,187,761 6,445,946 2006 2007 Increase Decrease

TABLE 1 (SOURCE: ANNUAL REPORTS OF COMPANY)

INTERPRETATION: The above table shows that from the year 2006 to 2007 predicted as Increase in the working capital to the extent 82,203,081

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FOR THE YEAR 2007-2008 PARTICULARS CURRENT ASSESTS inventories sundry debtors 3,737,406 47,984,094 2,701,970 6,497,932 1,035,436 41,486,162 2007 2008 Increase Decrease

cash and bank balances

10,103,586

22,392,298 12,288,712

loan & advances

46,538,734

219,925,958 173,387,224

(A) CURRENT LIABILITIES liabilities provisions

108,363,820

251,518,158

27,162,409 13,138,409

208,551,609 13,138,409

181,389,200

(B) (A-B) WORKING CAPITAL

40,300,818

208,551,609

68,063,002

42,966,549

increasing inWC

25,096,453

25,096,453

TOTAL

68,063,002

68,063,002

223,910,798

223,910,798

TABLE 2 (SOURCE: ANNUAL REPORTS OF COMPANY)

INTERPRETATION:

The above table shows that there has been decrease in the working capital to
the extent of 25,096,453 from the year 2007to 2008.

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FOR THE YEAR 2008-2009 PARTICULARS CURRENT ASSESTS 2008 2009 Increase Decrease

inventories

2,701,970 2,103,081

598889

sundry debtors

6,497,932 1,774,173

4723759

cash and bank balances

22,392,298 22,706,201

313903

loan & advances

219,925,958 198,841,739

21084219

(A) CURRENT LIABILITIES

251,518,158

225,425,194

liabilities provisions

208,551,609 96,531,995 -

112019613.6

(B) (A-B) WORKING CAPITAL

208,551,609

96,531,995

42,966,549

128,893,199

increasing inWC

85,926,650

85,926,650

TOTAL

128,893,199

128,893,199

112,333,517

112,333,517

TABLE 3

(SOURCE: ANNUAL REPORTS OF COMPANY)

INTERPRETATION: The above table shows that from the year 2008 to 2009 predicted as Increase in the working capital to the extent 85,926,650.
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FOR THE YEAR 2009-2010 PARTICULARS CURRENT ASSESTS 2009 2010 Increase Decrease

inventories

2,103,081

1,872,220

230,861

sundry debtors

1,774,173

836,233

937,940

cash and bank balances

22,706,201

19,355,584

3,350,617

loan & advances

198,841,739

199,957,504

1,115,765

(A) CURRENT LIABILITIES

225,425,194

222,021,541

liabilities provisions

96,531,995 -

126,856,244 -

30,324,249

(B) (A-B) WORKING CAPITAL

96,531,995

126,856,244

128,893,199

95,165,297

increasing inWC

33,727,902

33,727,902

TOTAL

128,893,199

128,893,199

34,843,667

34,843,667

TABLE 4 (SOURCE: ANNUAL REPORTS OF COMPANY)

INTERPRETATION: The above table shows that there has been decrease in the working capital to the extent of 33,727,902 from the year 2009to 2010.

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FOR THE YEAR 2010-2011 PARTICULARS CURRENT ASSESTS 2010 2011 Increase Decrease

inventories

1,872,220

1,872,220

sundry debtors

836,233

30,949,652

30,113,419

cash and bank balances

19,355,584

9,787,071

9,568,513

loan & advances

199,957,504

18,563,880

181,393,624

(A) CURRENT LIABILITIES

222,021,541

59,300,603

liabilities provisions

126,856,244 -

81,432,874 -

45,423,370

(B) (A-B) WORKING CAPITAL

126,856,244

81,432,874

95,165,297

(22,132,271)

increasing inWC

117,297,568

117,297,568

TOTAL

95,165,297

95,165,297

192,834,357

192,834,357

TABLE 5 (SOURCE: ANNUAL REPORTS OF COMPANY)

INTERPRETATION: The above table shows that there has been decrease in the working capital to the extent of 117,297,568 from the year 2010to 2011.

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3.2 MANAGING WORKING CAPITAL I. TO STUDY OVERALL EFFECIENCY OF WORKING CAPITAL 3.2. NET WORKING CAPITAL
CURRENT YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 CURRENT ASSETS 108,363,820 251,518,158 225,425,194 222,021,531 169,300,603 LIABILITIES 40,751,039 208,551,609 96,531,995 115,693,346 81,423,874 NET.WORKING CAPITAL 67,612,781 42,966,549 128,893,199 106,328,185 87,876,729

TABLE 6 (SOURCE: ANNUAL REPORTS OF COMPANY)

NET.WORKING CAPITAL
140,000,000 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 2006-07 2007-08 2008-09 2009-10 2010-11 NET.WORKING CAPITAL, 87,876 ,729

CHART: 1
INTERPRETATION: 1. Net working capital of Ashok Leyland Wind Energy Ltd is maintained balanced in all years. 2. Except in 2007-08. In this year the net working capital is very low. 3. In the year of 2008-2009 net working capital is high.
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3.2.1. WORKING CAPITAL TURN OVER RATIO

NET WORKING YEAR SALES CAPT TURN OVER RATIO

2006-07 2007-08 2008-09 2009-10 2010-11

30,187,023 30,187,023 137,472,189 137,472,189 73,089,013

67,612,781 42,966,549 128,893,199 106,328,185 87,876,729 TABLE: 7

0.45 0.70 1.07 1.29 0.83

(SOURCE: ANNUAL REPORTS OF COMPANY)

TURN OVER RATIO

1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2006-07 2007-08 2008-09 2009-10 2010-11 TURN OVER RATIO

CHART: 2
INTERPRETATION: 1. The working capital turnover ratio of Ashok Leyland Wind Energy Ltd is increasing from 2006-07 to 2009-10. But suddenly there is a dip in 2010-11. 2. In the year 2009-10, the performance of Ashok Leyland Wind Energy Ltd is in peak position. 3. In the year 2010-11 due to the Nature and Machinery problems energy not able to generate compare to the previous year.
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II. TO STUDY THE STRUCTURE OF WC: 3.2.1.1CURRENT ASSETS TO TOTAL ASSETS CURRENT YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 ASSETS 108,363,820 251,518,158 225,425,194 222,021,531 169,300,603 TOTAL ASSETS 287,900,000 285,400,000 285,400,000 292,300,000 305,504,375 TABLE: 8 (SOURCE: ANNUAL REPORTS OF COMPANY) CA/TA RATIO 0.38 0.88 0.79 0.76 0.55

CA/TA RATIO
1.00 0.80 0.60 0.40 0.20 0.00 2006-07 2007-08 2008-09 2009-10 2010-11 CA/TA RATIO

CHART: 3
INTERPRETATION: 1. This CA to TA ratio is of reducing tendency. 2. In the year 2007-08 it is highest and in 2006-07 it is lowest. 3. In the year of 2007-08 current assets is reducing year by year.

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3.2.1.2 CURRENT LIABILITIES TO TOTAL LIABILITIES

CURRENT YEAR LIABILITIES TOTAL LIABILITIES CL/TL RATIO

2006-07 2007-08 2008-09 2009-10 2010-11

40,751,039 208,551,609 96,531,995 115,693,346 81,423,874

287,900,000 285,400,000 285,400,000 292,300,000 305,504,375 TABLE: 9

0.14 0.73 0.34 0.40 0.27

(SOURCE: ANNUAL REPORTS OF COMPANY)

CL/TL RATIO
0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 2006-07 2007-08 2008-09 2009-10 2010-11 CL/TL RATIO

CHART: 4
INTERPRETATION: 1. In the year of 2006-07 very low compare by the year. 2. But company is capable of recovering. in 2009-2010 3. 2007-08 has highest ratio.

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3.2.2. LIQUIDITY RATIOS: 3.2.2.1 CURENT RATIO CURRENT YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 ASSETS 108,363,820 251,518,158 225,425,194 222,021,531 169,300,603 CURRENT LIABILITIES 40,751,039 208,551,609 96,531,995 115,693,346 81,423,874 TABLE: 10 (SOURCE: ANNUAL REPORTS OF COMPANY) RATIO 2.66 1.21 2.34 1.92 2.08

RATIO
3.00 2.50 2.00 1.50 1.00 0.50 0.00 RATIO 2006-07 2.66 2007-08 1.21 2008-09 2.34 2009-10 1.92 2010-11 2.08

CHART: 5
INTERPRETATION: 1. This ratio indicates the extent to which short term creditors are safer in terms of liquidity of the current assets. 2. Thus, higher the value of the current ratio, more liquid the firm is and more ability it has to pay the bills. However a current ratio of 2:1 is considered generally satisfactory. As per the study the current ratio varies from 1.92 to 2.08.
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3.2.2.2

LIQUID RATIO QUICK CURRENT LIABILITIES 40,751,039 208,551,609 96,531,995 115,693,346 81,423,874 TABLE: 11 (SOURCE: ANNUAL REPORTS OF COMPANY) RATIO 2.57 1.19 2.31 1.90 2.06

YEAR 2006-07 2007-08 2008-09 2009-10 2010-11

ASSETS 104626414 248816188 223322113 220149311 167428383

RATIO
3.0 2.5 2.0 1.5 1.0 0.5 2006-07 2007-08 2008-09 2009-10 2010-11 1.2 2.6

2.3 1.9

2.1 RATIO

CHART: 6
INTERPRETATION: 1. The quick ratio of 1:1 is considered satisfactory. 2. In the year of 2007-08 decrease ratio. But company is capable of recovering in 20082009. 3. The quick ratio during the period of study is satisfactory which varies from 1.90 to 2.06.
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3.2.3. PROFITABILITY RATIOS: 3.2.3.1 GROSS PROFIT RATIO

GROSS YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 PROFIT 79,986,082 63,008,754 170,506,540 33,777,649 97,270,820 SALES 30,187,023 30,187,023 137,472,189 137,472,189 73,089,013 GROSS PROFIT RATIO 264.97 208.73 124.03 24.57 133.09

TABLE: 12 (SOURCE: ANNUAL REPORTS OF COMPANY)

GROSS PROFIT RATIO

300.00 250.00 200.00 150.00 100.00 50.00 2006-07 2007-08 2008-09 2009-10 2010-11

CHART: 7
INTERPRETATION: 1. From the table shown above gross profit of the firm is satisfactory in all the years except in 2009-10. But gross profit ratio is decreasing year by year. 2. But it was recovered very soon by next year and it is still doing well.

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3.2.3.2 NET PROFIT RATIOS

YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 NET PROFIT 11,895,875 25,365,057 86,109,397 30,020,038 35,004,462 SALES 30,187,023 30,187,023 137,472,189 137,472,189 73,089,013 NET PROFIT RATIO 39.4 84.0 62.6 21.8 47.9

TABLE: 13 (SOURCE: ANNUAL REPORTS OF COMPANY)

NET PROFIT RATIO

90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 2006-07 2007-08 2008-09 2009-10 2010-11

CHART: 8
INTERPRETATION: 1. By comparing years from 2006-2011, the falling category fount to be very less in the year 2008-09 2. 2007-08 has highest ratio.

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3.3. INVENTORY MANAGEMENT RATIOS: 3.3.1 INVENTORY TURN OVER RATIO

AVERAGE YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 SALES 30,187,023 30,187,023 137,472,189 137,472,189 73,089,013 INVENTORY 3737406.00 2701970.00 2103081.00 1872220.00 1872220.00 ITR 8.1 11.2 65.4 73.4 39.0

TABLE: 14 (SOURCE: ANNUAL REPORTS OF COMPANY)

ITR
80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 2006-07 2007-08 2008-09 2009-10 2010-11

ITR

CHART: 9 INTERPRETATION: 1. During the 2009-10 the company has high inventory ratio of 73.4, which means more capital is being locked up in the inventory. Very low inventory ratio is 8.1 the year of 2006-2007 2. Inventory turn over ratio increasing from 2006-07 to 2009-10. But suddenly there is a dip in 2010-11 from ratio 73.4 to 39.0.

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3.3.2 INVENTORY HOLDING PERIOD

YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 Days 360 360 360 360 360 ITR 8.1 11.2 65.4 73.4 39.0 IHP 44.57 32.22 5.51 4.90 9.22

TABLE: 15 (SOURCE: ANNUAL REPORTS OF COMPANY)

IHP
50.00 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 IHP

2006-07 44.57

2007-08 32.22

2008-09 5.51

2009-10 4.90

2010-11 9.22

CHART: 10
INTERPRETATION: 1. Inventory holding period from 2007-11 decreased year by year. 2. In the year of 2009-10 is very low holding period. 3. In the year of 2006-2007 is high holding period. In a long position, holding period refers to the time between an asset's purchase and its sale.

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4.4 RECEIVABLES MANAGEMENT 3.4.1 ACCOUNTS RECEIVABLE TURN OVER RATIO

DEBTORS TURN

AVERAGE YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 Sales 60,187,023 30,187,023 137,472,189 137,472,189 73,089,013 DEBTORS 17,984,094 6,497,932 1,774,173 836,223 30,949,652

OVER RATIO
3.35 4.65 77.49 164.40 2.36

TABLE: 16 (SOURCE: ANNUAL REPORTS OF COMPANY)

DTR
DTR 2010-11 2009-10 2008-09 2007-08 2006-07 4.65 3.35 77.49 2.36 164.40

CHART: 11
INTERPRETATION: 1. Receivables turnover ratio is highest in 2009-10.

2. Receivables turnover ratio is lowest in 2010-11.

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3.4.2 DEBTORS COLLECTION PERIOD

DEBTORS COLLECTION

YEAR 2006-07 2007-08 2008-09 2009-10 2010-11

Days 365 365 365 365 365

DTR 3.35 4.65 77.49 164.40 2.36

PERIOD

109.06 78.57 4.71 2.22 154.56

TABLE: 17 (SOURCE: ANNUAL REPORTS OF COMPANY)

DCP
2010-11 2009-10 2008-09 2007-08 2006-07 2006-07 DCP 109.06 50.00 2007-08 78.57 100.00 2008-09 4.71 150.00 2009-10 2.22 200.00 2010-11 154.56

CHART: 12
INTERPRETATION: 1. Receivables management in Ashok Leyland wind energy Ltd is very efficient. From 2007-08 to 2009-10 debtors collection period was decreasing. 2. But in the year 2006-07 the collection period increased to more than 100%

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3.4.3 CREDITORS TURN OVER RATIO:

CREDIT YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 PURCHASES 2,421,298,310 3574581875 4,022,181,375 4,240,232,740 9,948,400,945

AVERAGE CREDITORS 27,533,155 208,551,609 95,343,800 115,693,346 81,423,874

CREDITORS TURN OVER RATIO 87.94 11.61 42.19 36.65 122.18

TABLE: 18 (SOURCE: ANNUAL REPORTS OF COMPANY)

CTR
140.00 120.00 100.00 80.00 60.00 40.00 20.00 2006-07 2007-08 2008-09 2009-10 2010-11 CTR

CHART: 13
INTERPRETATION: 1. 2010-11 year has highest creditor turnover ratio. 2. 2007-08 year has lowest creditor turnover ratio.

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3.4.4 CREDITORS COLLECTION PERIOD

CREDITORS COLLECTION PERIOD

YEAR 2006-07 2007-08 2008-09 2009-10 2010-11

Days 365 365 365 365 365

CTR 87.94 11.61 42.19 36.65 122.18

(days) 4.2 31.4 8.7 10.0 3.0

TABLE: 19 (SOURCE: ANNUAL REPORTS OF COMPANY)

140.00 120.00 100.00 80.00 60.00 40.00 20.00 2006-07 2007-08 2008-09 2009-10 2010-11 CTR CHP

CHART: 14
INTERPRETATION: 1. In the year 2010-11 creditors collection period is low. 2. In the year 2007-08 the creditors collection period is very high.

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3.4.5 RECEIVABLES TO CURRENT ASSETS RATIO

AVERAGE YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 CREDITORS 27,533,155 208,551,609 95,343,800 115,693,346 81,423,874 CURRENT ASSETS 108,363,820 251,518,158 225,425,194 222,021,531 169,300,603 CTR 0.25 0.83 0.42 0.52 0.48

TABLE: 20 (SOURCE: ANNUAL REPORTS OF COMPANY)

CTR
0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 2006-07 2007-08 2008-09 2009-10 2010-11 CTR

CHART: 15
INTERPRETATION: 1. From the table given above, it is clear that receivable to current asset ratio is low in 2008-09. That means receivables management is very efficient in that year. 2. But in the year 2007-08 it is the highest.

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4.5 CASH MANAGEMENT 3.5.1. CASH TURN OVER RATIO

AVG CASH AND BALANCE YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 SALES 30,187,023 30,187,023 137,472,189 137,472,189 73,089,013 16,549,532 10,103,586 22,392,298 22,706,201 19,355,584 CTR 1.82 2.99 6.14 6.05 3.78

TABLE: 21 (SOURCE: ANNUAL REPORTS OF COMPANY)

CTR
7.00 6.00 5.00 4.00 3.00 2.00 1.00 2006-07 2007-08 2008-09 2009-10 2010-11 1.82 3.78 2.99 CTR 6.14 6.05

CHART:16
INTERPRETATION: 1. Cash turnover ratio is kept on increasing from the year 2006-07 to 2009-10. 2. In the year of 2008-09 high Cash turnover ratio is 6.14, 2006-07 is very low ratio 1.82. 3. In the year of 2010-11 the Cash turnover ratio decreases to 3.78.
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3.5.2 CASH RATIO:

CURRENT YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 Cash and Bank 16,549,532 10,103,586 22,392,298 22,706,201 19,355,584 LIABILITIES 40,751,039 208,551,609 96,531,995 115,693,346 81,423,874 Cash Ratio 0.41 0.05 0.23 0.20 0.24

TABLE: 22 (SOURCE: ANNUAL REPORTS OF COMPANY)

Cash Ratio
Cash Ratio

0.41 0.23 0.05 0.24

0.20

2006-07

2007-08

2008-09

2009-10

2010-11

CHART: 17
INTERPRETATION: 1. From the above table it is clear that cash ratio that is cash availability is decreasing from year by year. But in the year of 2008-11 cash ratio is constant year by year. 2. In the year 2007-08 it is just 0.05.its very low cash availability of the company because current liabilities is very high in the year of 2007-08.

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3.5.3 CASH TO CURRENT ASSETS

CURRENT YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 Cash 16,549,532 10,103,586 22,392,298 22,706,201 19,355,584 ASSETS 108,363,820 251,518,158 225,425,194 222,021,531 169,300,603 Cash To CA Ratio 0.15 0.04 0.10 0.10 0.11

TABLE: 23 (SOURCE: ANNUAL REPORTS OF COMPANY)

Cash To CA Ratio
0.18 0.16 0.14 0.12 0.10 0.08 0.06 0.04 0.02 2006-07 2007-08 2008-09 2009-10 2010-11 Cash To CA Ratio

CHART: 18
INTERPRETATION: 1. From the above table it is clear that percentage of cash in current assets is increasing from year by year. In the year of 2006-7-07 is very high ratio 0.15 2. In 2007-08 it is just 0.04%. Its very low ratio. 3. From the data given in the above table it is clear that the cash to current assets of the company is almost maintained constant except in the year 2007-08.

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CHAPTER 4
FINDINGS & SUGGESTIONS &CONCLUSION
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4.1 FINDINGS STATEMENTS SHOWING SCHEDULE OF CHANGES IN WORKING CAPITAL:

1. There has been increase in the working capital for the year 2006-07. 2. There has been decrease in the working capital for the year 2007-08 3. There has been increase in the working capital for the year 2008-09. 4. There has been decrease in the working capital for the year 2009-10 5. There has been decrease in the working capital for the year 2010-11

I WORKING CAPITAL RATIO ANALYSIS: 1) To study overall efficiency:

1. Net working capital of Ashok Leyland Wind Energy Ltd is maintained balanced in all years 2. The working capital turnover ratio of Ashok Leyland Wind Energy Ltd is increasing from 2006-07 to 2009-10. But suddenly there is a dip in 2010-11.

2) To study the structure of working capital:

1. The portion of current assets in total assets is reducing year by year. 2. In the year of 2006-07 very low compare by the year. But company is capable of recovering in 2010-2011. 2007-08 has highest ratio.

3) To study the liquidity of working capital:

1. This ratio indicates the extent to which short term creditors are safer in terms of liquidity of the current assets. 2. Thus, higher the value of the current ratio, more liquid the firm is and more ability it has to pay the bills. However a current ratio of 2:1 is considered generally satisfactory. As per the study the current ratio varies from 1.92 to 2.08. 3. The quick ratio of 1:1 is considered satisfactory. In the year of 2007-08 decrease ratio. But company is capable of recovering. In 2008-2009. The quick ratio during the period of study is satisfactory which varies from 1.90 to 2.06.

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4) To study the profitability ratios:

1. From the table shown above gross profit of the firm is satisfactory in all the years except in 2009-10. But gross profit ratio is decreasing year by year. 2. But it was recovered very soon by next year and it is still doing well. 3. By comparing years from 2006-2011, the falling category fount to be very less in the year 2008-092007-08 has highest ratio

II INVENTORY MANAGEMENT
1. During the 2009-10 the company has high inventory ratio of 73.4, which means more capital is being locked up in the inventory. Very low inventory ratio is 8.1 the year of 2006-2007 2. Inventory turn over ratio increasing from 2006-07 to 2009-10. But suddenly there is a dip in 2010-11 from ratio 73.4 to 39.0. 3. Inventory holding period from 2007-11 decreased year by year. 4. In the year of 2009-10 is very low holding period. 5. In the year of 2006-2007 is high holding period. In a long position, holding period refers to the time between an asset's purchase and its sale.

III RECEIVABLES MANAGEMENT

1. Receivables turnover ratio is highest in 2009-10. 2. Receivables turnover ratio is lowest in 2006-07. 3. Receivables management in Ashok Leyland wind energy Ltd is very efficient. From 2007-08 to 2009-10 debtors collection period was decreasing. 4. But in the year 2006-07 the collection period increased to more than 100% 5. 2010-11 year has highest creditor turnover ratio. 6. 2007-08 year has lowest creditor turnover ratio. 7. In the year 2010-11 creditors collection period is low. 8. In the year 2007-08 the creditors collection period is very high. 9. From the table given above, it is clear that receivable to current asset ratio is low in 2008-09. That means receivables management is very efficient in that year. 10. But in the year 2007-08 it is the highest.

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IV CASH MANAGEMENT:
1. Cash turnover ratio is kept on increasing from the year 2009-07 to 2009-10. 2. In the year of 2008-09 high Cash turnover ratio is 6.14, 2006-07 is very low ratio 1.82. 3. In the year of 2010-11 the Cash turnover ratio decreases to 3.78. 4. From the above table it is clear that cash ratio that is cash availability is decreasing from year by year. But in the year of 2008-11 cash ratio is constant year by year. 5. In the year 2007-08 it is just 0.05.its very low cash availability of the company because current liabilities is very high in the year of 2007-08. 6. From the above table it is clear that percentage of cash in current assets is increasing from year by year. In the year of 2006-7-07 is very high ratio 0.15 7. In 2007-08 it is just 0.04%. Its very low ratio. 8. From the data given in the above table it is clear that the cash to current assets of the company is almost maintained constant except in the year 2007-08.

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4.2 SUGGESTIONS:
Suggestions can be use by the firm for the betterment increased of the firm after study and analysis of project report on study and analysis of working capital.

I would like to Suggestions.

Company should raise funds through short term sources for short term requirement of funds, which comparatively economical as compare to long term funds.

Company should take control on debtor s collection period which is major part of current assets.

Company has to take control on cash balance because cash is non earning assets and increasing cost of funds.

Company should reduce the inventory holding period with use of zero inventory concepts.

Company should make a policy in respect of investment of excess cash, if any; in marketable securities and overall cash policy should be introduced.

Management should develop a credit policy and proper self realization system from customers so that efficient and effective management of accounts receivable can be ensured. This will significantly improve the profitability and liquidity of the company.

Over all company has good liquidity position and sufficient funds to repayment of liabilities. Company is increasing sales volume per year which supported to company to increase the market share year by year.

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4.3 CONCLUSION:
Working capital management is important aspect of financial management. The study of working capital management in Ashok Leyland wind energy ltd has revealed that the current ration was as per the standard industrial practice but the liquidity position of the company showed an increasing trend. The study has been conducted on working capital ratio analysis, working capital leverage, working capital components which helped the company to manage its working capital efficiency and affectively.

Working capital of the company was increasing and showing positive working capital year of 2006 to 2010 but now current year showing decrease working capital. It shows good liquidity position in per year.

Positive working capital indicates that company has the ability of payments of short terms liabilities

Companys current assets were always more than requirement it affect on profitability of the company.

Current assets are more than current liabilities indicate that company used long term funds for short term requirement, where long term funds are most costly then short term funds.

Current assets components shows sundry debtors were the major part in Current assets it shows that the inefficient receivables collection management.

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BIBLIOGRAPHY BOOKS REFERRED:

M.Y. KHAN AND P.K. JAIN 5th EDITION-MANAGEMENT ACCOUNTING NOIDA: -- Tata McGraw-Hill Publication I. M. PANDEY 2008 - FINACIAL MANAGEMENT- NEW DELHI;-Vikas Publishing House Pvt Ltd

PRASSANNA CHANDRA-- FINANCIAL MANAGEMENT

McGraw-Hill Education, 2008

Tata

FINANCIAL RATIO ANALYSIS: A HANDY GUIDEBOOK Charles K. Vandyck Trafford Publishing, 28-Nov-2006

ANNUAL REPORTS OF ASHOK LEYLAND WIND ENERGY LTD WEBSITES:

Available from: www.ashokleyland.com

Available from: www.mentormyproject.com

Available from: www.scribd.com Available from: www.investopedia.com.

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31.03.2006 Rs. SOURCES OF FUNDS

31.03.2007 Rs.

65

Share Holders' Funds Share Capital 180,600,000 230,600,000

Reserves & Surplus Capital Redemption Reserve 54,800,000 54,800,000

Unsecured Loans

185,400,000

2,500,000 287,900,000

APPLICATION OF FUNDS

Fixed Assets

13,760,218

8,780,496

Investments

17,216,420

17,176,867

Current Assets, Loans & Advances

Inventories Debtors Cash & Bank Balances Loans & Advances Total

3,170,170 23,796,333 16,549,532 24,124,450 67,121,485

3,737,406 47,984,094 10,103,586 46,538,734 108,363,820

Less Current Liabilities and Provisions :

82,230,758

40,751,039

Net Current Assets

67,612,781

(14,590,300)

Miscellaneous Expenditure to the extent not written off Profit & Loss Account

211,456,813 185,400,000

474,256 173,558,681 287,900,000

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66 31.03.2008 Rs. SOURCES OF FUNDS Share Holders' Funds Share Capital Reserves & Surplus Capital Redemption Reserve Unsecured Loans APPLICATION OF FUNDS Fixed Assets Investments Current Assets, Loans & Advances Inventories Debtors Cash & Bank Balances Loans & Advances 2,701,970 6,497,932 22,392,298 219,925,958 251,518,158 Less Current Liabilities and Provisions : Net Current Assets Miscellaneous Expenditure to the extent not written off Profit & Loss Account 42,966,549 211,456,813 285,400,000 66 67,612,781 237,128 186,091,756 287,900,000 208,551,609 3,737,406 47,984,094 10,103,586 198,230,482 260,055,568 192,442,787 13,760,218 17,216,420 14,207,192 19,751,143 54,800,000 285,400,000 54,800,000 2,500,000 287,900,000 230,600,000 230,600,000 31.03.2007 Rs.

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31-03-08 Rs. SOURCES OF FUNDS Share Holders' Funds Share Capital Reserves & Surplus Capital Redemption Reserve 54,800,000 285,400,000 APPLICATION OF FUNDS Fixed Assets Investments Current Assets, Loans & Advances Inventories Debtors Cash & Bank Balances Loans & Advances 2,701,970 6,497,932 22,392,298 219,925,958 251,518,158 Less Current Liabilities and Provisions : Net Current Assets Balance in Profit & Loss Account 128,893,199 125,347,416 285,400,000 67 208,551,609 13,820,239 17,339,146 230,600,000

31-03-09 Rs.

230,600,000

54,800,000 285,400,000

13,760,218 17,216,420

2,103,081 1,774,173 22,706,201 198,841,739 225,425,194 96,531,995

42,966,549 211,456,813 285,400,000

68 31-03-09 Rs. SOURCES OF FUNDS Share Holders' Funds Share Capital Reserves & Surplus Capital Redemption Reserve Unsecured Loans 285,400,000 APPLICATION OF FUNDS Fixed Assets Investments Current Assets, Loans & Advances Inventories Debtors Cash & Bank Balances Loans & Advances 2,103,081 1,774,173 22,706,201 198,841,739 225,425,194 Less Current Liabilities and Provisions : Net Current Assets Balance in Profit & Loss Account 106,328,185 155,367,454 285,400,000 68 128,893,199 125,347,416 292,300,000 96,531,995 1,872,220 836,223 19,355,584 199,957,504 222,021,531 115,693,346 13,264,642 17,339,719 13,820,239 17,339,146 54,800,000 54,800,000 6,900,000 292,300,000 230,600,000 230,600,000 31-03-10 Rs.

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31-03-2010 Rs. SOURCES OF FUNDS

31-03-2011 Rs.

Share Holders' Funds Share Capital Reserves & Surplus Unsecured Loans 230,600,000 54,800,000 292,300,000 230,600,000 74,904,375 6,900,000 305,504,375

APPLICATION OF FUNDS

Fixed Assets Investments Current Assets, Loans & Advances Inventories Debtors Cash & Bank Balances Loans & Advances

541,303 202,343,351

13,264,642 17,339,719

1,872,220 836,223 19,355,584 199,814,614 221,878,641

30,949,652 9,787,071 18,563,880 59,300,603

Less : Current Liabilities and Provisions Net Current Assets Balance in Profit & Loss Account

81,423,874 (22,123,271) 124,742,992 292,300,000 305,504,375 106,328,185

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